articles | 31 May 2016

Cyprus can become a global funds industry centre

Cyprus has the basic ingredients to become a competitive and credible centre for the global Funds Industry, Minister of Finance Harris Georgiades told the International Fund Summit that took place in Limassol recently.

Addressing the conference, Georgiades said that over the next few weeks "we shall be finalizing and bringing forward a set of legislative acts which will further enhance the Cyprus funds frameworks, in order to make it more cutting edge and modern, while maintaining a high degree of investor protection.”

He said the new features will include the introduction of registered funds, the introduction of licensed mini-managers and the introduction of limited partnerships with legal personality as an alternative investment fund vehicle, adding that the authorities are also exploring the introduction of a legal framework for licensed and regulated fund administrators. "We shall remain on readiness to promote any further improvements to our legal framework,” he remarked.

Pointing out that Cyprus is a common law-country within the EU and the Eurozone, with a stable and attractive tax regime, with world-class support services be it legal or accounting, with a strategic location and with quality of life and safety for professionals Georgiades said "this is exactly why I am absolutely convinced that Cyprus already has the basic ingredients that will allow it to become a competitive and credible centre for the global Funds Industry.”

Furthermore, Georgiades recalled that Cyprus emerged from a three-year recession with a smaller better capitalised banking sector, a balanced budget and promoting structural reforms.

On his part, Angelos Gregoriades, President of the Cyprus Investment Fund Association, said that as the financial services sector emerges from the economic crisis, and the country is regaining its reputation having completed the Economic Adjustment programme on time, while introducing major reforms that will increase the efficiency of the public sector, the Cyprus funds industry has an increasingly important role to play in raising finance to invest, in generating new jobs and wealth and in playing a leading part in the recovery of the local economy.

Outlining Cyprus’ comparative advantages, Gregoriades said the island offers one of the most attractive fund tax regimes in Europe; both at the level of the Fund Manager and the investors, as well as at the level of the Fund, while the authorities have already introduced provisions that exempt non-domiciled fund managers from taxation of their investment income and the 15% tax exception their earned income if their remunerated more than hundred thousand euro per year and there is no withholding taxes on investors and no VAT law that no VAT is charged on services in respect of investment management, administration and marketing services supplied to Funds carrying on business in Cyprus.

He furthermore said that at the level of the Fund, gains from buying-selling securities are tax exempt and interest income is reduced by a deem deduction on Funds Invested in the Fund, effectively reducing the tax on interest to 2.5%. He also pointed out that a new provision is to be introduced for carried interest taxation not exceeding 7%, in addition to the categorization of Islamic Fund instruments as securities and exempted from tax on any gains realized.

"It is therefore not a surprise that our Funds Industry isgaining significant momentum from both local and international promoters and we already record an increasing number of new applications to set up investment funds in Cyprus and fund management companies,” he added.

Gregoriades described Cyprus’ legal framework as an "all-encompassing and, at the same time, attractive enough to establish investment funds, which can meet diverse investor requirements and can accommodate a number of investment objectives including: Private Equity, Infrastructure, Real Estate, Venture Capital, Funds of Funds, Debt and/or Equity Securities. Loan origination funds are also permitted when targeting well informed/professional investors.”

"It is self-evident that good regulation and supervision go hand in hand with successful financial markets that contribute to growth,” Gregoriades added and he concluded: "Cyprus wishes to be at the forefront with its legal and regulatory framework that incorporates the enhanced regulatory measures adopted at EU level, while also offering investors and fund promoters stability along with cost and tax efficiency.”

On his part, John Patrick Hourican, Managing Director of Bank of Cyprus, the island`s largest lender pointed out that Cyprus needs to combat red tape in order to attract investment funds even more.

"We need to keep removing the obstacles that naturally get put in place as people try to do their jobs more and more perfectly,” he said.

He acknowledged that "Cyprus is not an overwhelming choice today for fund managers.”

"An overwhelming choice is Ireland. Cyprus has all of the capability and more of my own home nation and I would like it to take a large piece of that going forward pie,” he said.

Noting that Cyprus is the eastern gateway to the EU sitting under Asia and oasis of stability in an environment where the geopolitical and geo-economics are at their most, Hourican said "we must also focus on the facts of how we are perceived and what we need to do to resolve it.”

On the Cypriot economy, Hourican said that Cyprus is showing all the signs of recovery and added that he would be surprised if the 2016 growth rate is not significantly above 2% of GDP.

"All we need to do is get behind it as a business community and government as a regulator to make sure it happens. We need to keep removing the obstacles that naturally get put in place,” he said.

Hourican added that Cyprus could have a piece of the investment funds pie amounting to €1 trillion.

"I don`t see why the fund industry in Cyprus cannot be bigger that €1 trillion. There is every opportunity for us to achieve that,” he concluded.

Source: Famagusta Gazette

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